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Reviewing the World Energy Outlook 2008
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International Energy
Agency
The International Energy Agency (IEA) has published its review of the world’s energy situation in their “World Energy Outlook 2008”. I am going to review some of the points made by the IEA.
“The world’s energy system is at a crossroads. Current global trends in energy supply and consumption are patently unsustainable – environmentally, economically, socially. … there’s still time to change the road we’re on. It is not an exaggeration to claim that the future of human prosperity depends on how successfully we tackle the two central energy challenges facing us today: securing the supply of reliable and affordable energy; and effecting a rapid transformation to a low-carbon, efficient and environmentally benign system of energy supply. What is needed is nothing short of an energy revolution. This World Energy Outlook demonstrates how that might be achieved through decisive policy action and at what cost. It also describes the consequences of failure.”
Oil supply is projected to increase from 85 million barrels per day in 2007 to 106 mb/d in 2030. This is a downward revision in supply of 10 mb/d since the last year’s outlook. All of the increase will come from OPEC countries. Oil supply in non-OPEC countries has already peaked. This is based on the assumption that the OPEC countries invest enough to increase production.
“The projected increase in global oil output hinges on adequate and timely investment. Some 64 mb/d of additional gross capacity — the equivalent of almost six times that of Saudi Arabia today — needs to be brought on stream between 2007 and 2030. Some 30 mb/d of new capacity is needed by 2015. There remains a real risk that under-investment will cause an oil-supply crunch in that timeframe. The current wave of upstream investment looks set to boost net oil-production capacity in the next two to three years, pushing up spare capacity modestly. However, capacity additions from current projects tail off after 2010. This largely reflects the upstream development cycle: many new projects will undoubtedly be sanctioned in the near term as oil companies complete existing projects and move on to new ones. But the gap now evident between what is currently being built and what will be needed to keep pace with demand is set to widen sharply after 2010. Around 7 mb/d of additional capacity (over and above that from all current projects) needs to be brought on stream by 2015, most of which will need to be sanctioned within the next two years, to avoid a fall in spare capacity towards the middle of the next decade.”
Projected high oil prices will deter consumption, but only at the expense of economic growth and of living standards in consuming countries, both rich and poor.
World energy demand is projected to grow 1.6% per year from 2006 to 2030, an increase of 45%. Oil will remain the dominant fuel. Demand for coal will rise faster than other fuels in absolute terms. Since coal produces a greater amount of carbon dioxide than other fuels for the power produced, this will have a detrimental impact on overall carbon emissions.
China and India will account for over half of increased energy demand between 2006 and 2030.
The IEA is projected a 6 degree centigrade increase in global temperatures by the end of the century based on our current path of energy production and consumption. They are saying that urgent changes are needed in this course to prevent very destructive climate change.
Renewable energy sources will grow at an average rate of 7.2% through 2030, but will only account for 4% of total power generation in 2030.
$26 trillion in investments will be required in 2007 through 2030 to produce the energy required. Just over half will be required to just maintain our current level of supply capacity.
The IEA is projected that the price of oil will average $100 per barrel in 2008-2015, with prices doubling to $200 per barrel in 2030.
The rate of decline from existing oil fields is accelerating. This is mainly due to the fact that smaller fields decline at a faster rate than larger fields. Today we are finding smaller fields. The world-wide rate of decline is currently 6.7% for fields that have passed their production peak. We will need to spend more money to find and develop more marginal sources of oil. These new sources of oil will see production decline at a faster rate than larger fields found in the past. This will require more upstream investment to offset the rate of decline in existing fields.
